As Detroit's offices fill up, suburbs feel pain

[MSUguy]

When MyInsuranceExpert.com announced last week it is moving its headquarters and 85 workers from Troy to one of the downtown Detroit office buildings bought by entrepreneur Dan Gilbert, the online life insurance brokerage firm joined a growing trend.
And most of downtown Detroit's gain is amounting to some pain for the suburban office market.

The employee relocations of major companies such as Blue Cross Blue Shield of Michigan, Gilbert's Quicken Loans Inc. and DTE Energy eventually will leave a hole of empty office space in suburbia that's bigger than Comerica Park. About 9,700 workers will leave the suburbs, creating an estimated 871,000 square feet of empty space.


"I can't recall such a situation like this in my career when the momentum is clearly in favor" of downtown Detroit, said John DeGroot, vice president of research in the Southfield office of Grubb & Ellis Co., a commercial real estate advisory firm. "It's too soon, really, to say how long the impact will be other than to say that the central business district is going be much more competitive with the suburbs. And that's really not a bad thing."
....
The vacancy rate of Detroit's suburbs has increased almost 2 percentage points to 25.1 percent during the past two years; downtown Detroit's rate, meanwhile, has stabilized at 31.4 percent, according to Grubb & Ellis. But the impact of recently announced office shuffling has not been entirely absorbed, because thousands of workers still haven't actually made the move downtown, DeGroot said.
When they do, office vacancy rates in such markets as Southfield and Troy could hit levels neither community is used to seeing, DeGroot said


From The Detroit News: http://detnews.com/article/20110829/...#ixzz1Wl7dAVQt

[professorscott]

What I find interesting about this is that, over the past 50 years as business after business moved out from Detroit to the suburbs, it was just considered to be a natural progression of things, but now that some companies are moving back it's newsworthy.

Apparently man is now biting dog.

[canuck]

As this trend continues, and strong civic leaders the likes of Bing and Gilbert manage to steer Detroit's downtown toward high occupancy, you will witness more small businesses take root, and increased vitality. I think that a lot of key people are finally waking up to the potential of an overlooked downtown. This is pretty momentous. We are not talking small potatoes here.

[animatedmartian]

It shouldn't be unexpected. Unless businesses and people start coming in from outside of the region then places like Troy and Southfield are going to be very much impacted. I'd be more worried for Troy because it has so many office blocks along Big Beaver. They'd be in a really bad spot if they have any more buildings end up like the Sears HQ [[which is still sitting empty last I heard).

Though I wouldn't say Detroit would completely drain up suburban office space [[not every company needs/wants to be in Detroit) but there will be a noticeable difference and people shouldn't be surprised when companies are moving. Also, Detroit doesn't have as much Class A office space like the suburbs do, but that just means more opportunity for more development downtown. Interesting to see what will happen in the near future.

[Mind field]

Not sure a lack of class A office space will prevent all but the likes of FoMoCo from moving downtown, i.e. a very large company with thousands of employees. Downtown still has plenty of available class A space for small and mid sized firms. One Detroit Center must be at least 50% vacant with Comerica's departure.

[animatedmartian]

Indeed it is.

Just out of curiosity I looked at some other properties that had large amounts of space available.

Southfield.

Troy.
More accurate? Numbers look a little funky.

First National Building

Penobscot.

1 Woodward.